London Housing: Same Old Story

It’s the same old story being told in the London housing market and it’s like a re-run of a boring series or some B movie starring George Osborne, the UK Chancellor of the Exchequer and the Prime Minister David Cameron. That’s when they both have taken off their wellies and put their brollies away after running round the Home Counties and Surrey to visit the poor people that live there and that have been immersed in water up to their necks due to the weather conditions. It’s all low-budget and headless-chicken media hype for the voters, where ‘money has no object’ (apparently according to David Cameron). Although, he will be asking for the EU to pay for it all. Is that the same EU that David Cameron wants to opt out of in 2017? Interesting! Yes, they have far more to contend with and why would they even be bothered about the London housing market at all?

The asking price of UK properties rose nearly 7% on last year’s price, hitting £250, 000 (or $419, 000) this month. That’s once again the highest increase in price for the past six years. There are some property specialists that are once again talking of a housing bubble. Had they not seen it coming before? It couldn’t be plainer that there is a bubble ready to burst with a shortage of properties, increased numbers of people gaining access to the property market via schemes that have been set up by the Chancellor of the Exchequer (and yet still not having either the creditworthiness nor the job security to go with the loans that are being taken out). Shortages in properties are just fuelling prices in London. Prices in London have risen by 11.2% in the past year and by 7.8% in the South-East of the UK in general. But, it looks as if there is only a housing bubble waiting for Mr. Cameron to stick a pin into it in London and the SE of the country.

The average house in London is today £541, 313, which is double the price of the national average. That price is nothing in comparison to certain affluent boroughs in London where the average house price is in excess of £2 million (such as in Kensington or Chelsea, for example).

Interest rates have never been lower. But, the Governor of the Bank of England Mark Carney left the 0.5% interest rate as it stood at the start of this month, fuelling ideas that he was having his puppet strings pulled from up above in the government and that he was simply the frontman. Interest rates have been at this level since March 2009. In January, Mr. Carney stated that 2014 was going to be a fantastic year for the UK housing market. Perhaps, not fantastic, but memorable (in the bad sense of the word) might be on the cards. But, even back then, he was being warned that he would eat his words.

Mr. Carney stated yesterday in a BBC interview that: “What we've seen in the housing market is an adjustment from very low levels. So if you look at the level of transactions, how many houses are purchased how many mortgages are struck, they dropped more than 50 percent…they have not bounced back but they are still more than 25 percent below historic averages, let alone stronger than historic averages”. But, the Bank of England has no power to stop what was imagined up to be the recipe for a better economy. It’s just back to 2007 like a shot.

The only things that are keeping the housing market buoyant, wherever that may be in the world are the over-generous (stupid?) central-banking policy of easy money and investors. It has nothing to do with the economy actually getting better at any stage. Foreign buyers are also fuelling the increase in prices, by buying in cash.

In the USA, house prices are set to increase by roughly 5 or 6% this year. We’ll see what happens there in the land of the birth of the housing bubble.

Anyhow, in the UK it’s all the same, Carney, Osborne and Cameron have been the three witches around the cauldron and they have been throwing in a few old toes of frogs and tongues of dogs, hubble, bubble, toil and trouble. The spell has been cast, the cauldron is a bubbling: it’s time! It’s time!